100. We are talking about housing. Is there
nobody anticipating a problem?
(Mr Branton) Our role is bound to be reactive.

101. Is there nobody anticipating problems and
influencing the Commission and its interpretation of the rules,
or is it purely reactive?
(Mr Branton) Our role is reactive vis-a"-vis
other departments who have the policy responsibility for the subject-matter
in question. It is up to those departments to perceive whether,
through their contacts with industry and through their general
policy development work, there is a state aid problem in relation
to that work. If they perceive such a problem to exist, they come
to us, we discuss how we can get round it, how we can move the
agenda forward, how we can persuade the Commission to take an
enlightened approach. We do that in a large number of areas. Housing
is one which we are addressing at the current time.

Ms King

102. So did that work with PIP?
(Mr Savill) Sorry, can you repeat the question?

103. Did that strategy that you have outlined,
for identifying problems coming up in advance, work with PIP?
(Mr Savill) It was a bit before my time. I have read
the files, but it is difficult to tell. What is clear is that
for a long timethe Commission's investigation into PIP
went on for yearsit was perfectly clear that there was
a problem. There are many, many exchanges between my Department
and what was then the DETR on the files, so there was clearly
a partnership approach to how we were going to approach the Commission's
investigation, how we were going to respond to their arguments.
Yes, I would say it worked. It was perfectly clear there was a
problem.

Mrs Ellman

104. In Scotland a scheme for gap funding or
the equivalent of gap funding has actually been approved, has
it not?
(Mr Savill) Yes.

105. They have now set that precedent. Is this
now going to be applied to England?
(Mr Branton) We hope so.

106. Are you arguing that case in Europe?
(Mr Branton) As I said, it has to be agreed with the
department responsible for the policy, so it is not up to us to
determine the policy, it is up to us to advise on the state aid
rules.

107. Have you been asked to advise on that?
(Mr Branton) Yes, we have, and we are discussing that
with the department responsible as to how we can use the Scottish
precedent to develop a housing scheme in England.

Chairman

108. What it really amounts to is that the devolved
administration in Edinburgh can get its act together and get cracking
and get something out of the Commission, whereas between you and
all the other English departments you have not got your act together,
is that right?
(Mr Branton) Actually we advised the Scottish Executive
on that scheme and helped them to get approval for it, so we act
as their interlocutor in Brussels on state aids issues just as
we do with DTLR and so on.

109. So you can actually manage to co-operate
with them in Edinburgh, but you cannot manage to co-operate with
the department here?
(Mr Branton) No, as I said, we are co-operating with
the department here.

Chairman: But slowly.

Chris Grayling

110. The implication would be that the Scottish
Executive was moving faster on this, but the department here with
responsibility for it was not?
(Mr Branton) I do not think it is up to us to comment
on what has happened inside other departments.

Mr Betts

111. But what you are saying to us is that for
England there is no agreed scheme within Government to replace
gap funding, which has been put to the Commission for housing?
(Mr Branton) In relation to housing, no.

112. After two years there is no scheme?
(Mr Branton) No, one is being worked on at the moment,
and we have been advising on it, but there is not anything at
the moment.

Chairman

113. Can you explain to me what they have in
Scotland, that they have not got here, which makes them get a
move on?
(Mr Branton) That makes them get a move on?

114. They have got it there. You say you helped
them.
(Mr Branton) Yes, we did. They came to us. This is
the normal way. They came to us with a scheme that they had drawn
up. It is up to them how they draw it up, what the priorities
are, what the ministerial impetus is behind them; that is up to
the Scottish Executive. They came to us with a scheme, they asked
for advice on how they could get it cleared through Brussels.
We looked at the principle that had emerged out of the Regional
Venture Capital Fund approval scheme which was a completely different
type of state aid problem, but one which we negotiated through
the Commission. Some of the principles arising out of the RVCF
approval decision we thought could perhaps be used in a housing
context, so we used the Scottish notification to put forward some
rather innovative arguments in relation to getting approval for
the Scottish scheme, and that proved successful. The Commission
agreed with our approach, even though it was innovative, and they
approved the Scottish scheme in a relatively short space of time.
So we were delighted. We considered it a major success.

Mrs Ellman

115. So the Scottish Executive asked you to
resolve this issue, but UK Government Ministers did not ask you
to resolve the issue for the rest of the UK? Is that in practice
what has happened?
(Mr Savill) No. The Scottish Executive came to us
earlier.

116. Did Government Ministers come to you and
ask for you to develop the scheme?
(Mr Savill) It was all at officials level, in that
Scottish Executive officials came to us.

117. All right. Which officials would it be
representing the UK Government if it is not you, whom they would
have asked to look at this for the rest of the UK?
(Mr Savill) They have now done.

118. They have now, but they did not before.
(Mr Branton) They did it later, yes.

Chris Grayling

119. Can I ask on this point, do you ever get
a situation where the Commission comes to you and says you may
not do something, and you just turn round and say, "This
is not an area where you have competence. Go away."? You
could make a strong argument for saying that housing is not an
area where the Commission has competence. It may have invented
competence, but really whether the Commission should properly
be interfering in urban regeneration schemes in the UK, under
the pretext of the Single Market, I would say is highly questionable.
(Mr Branton) I think we have taken legal advice on
the Commission's interpretation of the impact on intra-Community
trade and the need for intra-Community trade on many occasions,
and there are a number of European Court judgments on that point.
We do not consider that it is possible to challenge the Commission's
interpretation that when aid is given to a developer, that has
the potential to influence intra-Community trade. As long as it
has the capacity to influence intra-Community trading and it falls
under the competition provisions of the EC Treaty then the Commission
does have jurisdiction to implement those.